American Weekly Fundamental Outlook, 03/11/13 to 03/15/13

For the coming week, anticipate a stronger Greenback for the coming session signaling continued growth in the US, despite the sequestration concerns, the US Non-Farm Payroll increased by 236,000 jobs in February while unemployment fell by 7.7%, though the structural issue remains. The January’s job gain was revised down to 119,000, but an upward revision in December led to a net decline of only 15,000. Gains were evident across most key sectors including manufacturing, construction and business services.

In addition, private sector jobs growths averaged 203,000 over the past three months, while jobs in the construction sector averaged 37,000 over the past three months, corroborating the gains in housing starts. The bottom line is that from an employment prospective, February shows no evidence that whether or not sequestration concerns hampered jobs gains, Federal employment remains flat.

Furthermore, income and job growth continue to move forward, yet remain below the pace of the prior two economic expansions. In February, average hourly earnings rose by 0.8% and aggregate hours worked rose by 0.5%. This combination is good for household income. For February, the three-month average annualized growth rate of our income proxy, the basis for consumer spending was 5.7% which is quite high, this proxy is an input to estimates of growth and as such the index implies continued gains in consumer spending and real GDP.

Moreover, even is the employment data improved, though slow, the cyclical fashion, other indicators on the labor market continue to indicate that today’s environment has changed from the past. Job vacancies on the other hand, have become more plentiful as the economy has recovered, according to the US statistic, however the unemployment rate remains high relative to the rate of jobs openings in the previous cycle and indicates more friction in

matching the unemployed with available jobs. It has been argued that the outward swing in the Beveridge curve is typical during the early stage of a labor market recovery. While some skills mismatch, is to be expected as the economy undergoes significant periods of restructuring following a recession, more than three years into the recovery, the Beveridge curve remains above its path during the most recent economic expansion.

The data to watch for the coming week, on Wednesday, expect the US Retails Sales to show a high reading in its projection of 0.5% as compared to its previous reading of 0.1%, while Import Prices drop by 0.5% in its forecast. In addition, Business Inventories projects a rise of 0.3% in its upcoming reading, other indicators might also support the Greenback with the US 10year Bond Auction and its Crude Oil Inventories. On Thursday, expect its Unemployment Claims to show some steam as its projects a nasty rise of 355k, as compared to its 240k, plus its PPI is showing a rise of 0.6% in its forecast. Other medium impact indicators like the Current Account and the Speech of FOMC Raskin scheduled on the same day. And on Friday, expect the the US Core CPI showing a slight drop in its projection of 0.2% coming from its previous 0.3%, its Empire State Manufacturing Index showed a slowdown in its projection of 8.5 following a 10.0 in prior reading, expect the TIC Long-Term Purchases to dip in its forecast of 55.3, while both the US Capacity Utilization showing a 79.4% rise and its Industrial Production also showing a climb of 0.3% and lastly its Prelim UoM Consumer Sentiment showing an increase of 78.2 in its projection.

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